Value for money is a concept that has often seemed alien to the IT industry - especially in the eyes of executives whose companies have paid vast sums for complex systems which fail to produce the promised advantages.

But with demand falling, profits dwindling and prospects uncertain - especially after the events of September 11 - companies are far less tolerant of investments which produce minimal or no returns. IT projects are expected to make significant and measurable contributions to performance.

"In these economically difficult times, companies are looking at investment in technology far more stringently," says Chris Dedicoat, group vice president for Europe at Cisco, the US network equipment company. "They haven't stopped spending, but they're more cautious."

Thus, there is far more emphasis on measuring results than during the 1990s phase of big ERP (enterprise resource planning) projects, the pre-2000 IT spending spree to ward off millennium bug threats, and the infamous dotcom boom.

Sophisticated new software makes it possible to measure the effect of projects to an extent previously not possible. "You shouldn't do IT projects because of generalised or vague future benefits," says Brent Habig, head of US-based Tigris Consulting. "If you can't calculate it, you probably should be critical of it."

Such measurable benefits could be reduced inventory levels or lower purchase prices for materials. Mr Habig sees companies opting increasingly for smaller customised projects - often costing less than $500,000 - with specific goals, more easily measurable targets, and fairly short payback times.

It is also vital that IT is aligned much more closely to real business goals than in the past. "IT is challenged to have a greater understanding of the business to succeed in the new environment," he adds. "Fundamentally, it is a rewriting of the relationship between IT and business."

Andy Tinlin, a partner with KPMG Consulting, believes companies must be far clearer about what technology can and cannot do for them. This means greater awareness at board level about IT's benefits and drawbacks.

"It should be business driving the technology and not technology driving the business," he says. "The next wave of technology adoption will be more considered, more enterprise-focused, and aligned very much to business objectives."

This will be a sharp contrast to the way many companies have handled their IT strategies. A recent study by PA Consulting found that businesses were unhappy over returns on their IT spending.

"Many companies are frustrated by the practicalities and pressures on their IT resources and find that the impetus for delivering business benefits is frequently lost after the financial investment and immediate project deadlines are met," it said in the study, Increasing business value with Information Technology.

PA recommended that companies concentrate on three key principles: agree what drives value in the business, so that senior management can target opportunities for IT; agree who is responsible for realising the business value of IT; and drive all IT activities in pursuit of business value.

While the most advanced companies are now trying to do this, others are still struggling. PA found that only 40 per cent of executives surveyed in Europe, the US and Asia-Pacific had confidence in the business cases used to justify their companies' IT investments.

In addition, 72 per cent of respondents in PA's study believed visible success with IT was now far more important for the personal survival of the chief executive. "This view underlines the need for the CEO to take a personal lead in making the business value of IT visible on the board's agenda and in shareholder communication."

This means IT has to be regarded as